Why you should open a Roth IRA
Maybe you have heard of a Roth IRA and maybe you’ve even done a little bit of research, but you haven’t pulled the trigger yet- this post is for you.
Here are the reasons why you should open a Roth IRA:
#1. It is a tax advantaged account. You put in post-tax dollars so when you withdraw money down the road, probably in retirement (you can withdraw contributions tax-free at any age), you will not need to pay taxes on your gains. That means if you invested $100,000 over the course of a few years but when you retire its worth $600,000, you don’t need to pay capital gains taxes on the $500,000 gains you made- incredible!
#2- If you are a young person and making a lower-income than you expect to make in the future as your career goes on, this is for you because you are in a lower tax-bracket now than you will be once you retire. So you put in your post-tax dollars now AND you don’t have to pay taxes when you pull out the money once you are in a higher tax-bracket. Seems perfect, right?
#3- This is a great place for beginners to start with investing. You can have your hard earned money grow tax free while working up to eventually hitting the $6,000 yearly contribution cap. Because it is tax advantaged, they have limits for contributions, which now is 6k if you’re under 50 and 7k if you’re above 50. While investing 6k a year may seem like a lot right now for you, it may be possible some day and it is a great goal to set for yourself eventually so you can really set yourself up for retirement.
Do you need any more reasons? If you want to see how far your investments can get you check out the Compound Interest Calculator and put in your estimated contributions, and you can see how far it will go and how much you will have for retirement.
So what are you waiting for? Open your Roth IRA.
Some options for brokerages are Schwab, Fidelity, and Vanguard. Don’t get too stuck on this step, they are all great options. I use Schwab and its great- so if you can’t make a decision, I’ll make it for you. Open yours at Schwab. Then put in your money and buy your investments! We can talk more about that later.
